HashiCorp's Growth Will Rebound To 30%+ Annually Over Years: Analyst

Needham analyst Alex Henderson reiterated a Buy rating on HashiCorp, Inc. HCP, raising the price target to $36 from $34.

The "year of efficiency" continues to drive the team-building needed to pave the path for wider Enterprise adoption of Hashi's products, notes the analyst. 

HashiCorp reported an Adjusted EPS loss of $(0.10) in Q2 FY24, beating the estimate of $(0.15). 

HashiCorp modestly raised guidance across the board, upping the growth outlook ~100 bps to 20%-21% for FY24. 

Henderson believes that the raised outlook is prudent considering a stable macro environment Q-Q as cloud programs are a high priority for Enterprises. 

However, Hashi's new guide implies slower growth overall, resulting from macro pressures. 

The analyst thinks while the macro environment is likely to limit CY23 growth, new customer additions are laying the roadmap for future reacceleration. 

Henderson expects HCP to deliver solid margin leverage over time as the platform enables increasingly frictionless adoption and drives significant upsell and cross-sell. 

Additionally, as the product line expands and becomes more tightly integrated, HashiCorp becomes even more mission-critical.

In the long term, the analyst thinks Hashi should be able to drive a 20%-30% Operating Margin business model.

According to the analyst, this will prove temporary, and growth will rebound to 30% + annually over the next several years.

The analyst adds that Terraform continues to benefit as customers strategically move to multi-cloud and as generative AI workloads take off.

For FY24, the analyst expects EPS of $(0.21) loss, narrower than the previous estimate of $(0.27) loss. Revenue estimates are raised to $572.1 million from $567.0 million.

For FY25, the analyst raised EPS estimate to $0.17 from $0.14. Revenue estimates are raised to $683.8 million from $681.4 million.

Price Action: HCP shares are trading lower by 3.69% to $28.08 on the last check Friday.